HBA-GUM C.S.H.B. 3531 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 3531 By: Coleman Pensions & Investments 4/19/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Current law prohibits a person receiving a benefit from a city pension plan in certain large municipalities from becoming eligible to receive a pension from another city pension system. This has created a disincentive for City of Houston retired police officers and firefighters, interested in returning to municipal employment, to provide their services to the city in a municipal position. In addition, elected officials and appointed executive officers are subject to term limits which restrict their opportunity to accrue meaningful pension benefits under the current plan, causing the city difficulty in attracting qualified personnel to serve in executive positions. C.S.H.B. 3531 creates an executive official pension plan to provide eligible executive officials affected by term limits with an incentive to serve in a public position and receive meaningful retirement benefits for their service. The bill also removes the eligibility restriction to allow persons receiving a pension from a municipal pension system to also become eligible to become members of another pension system. C.S.H.B. 3531 authorizes the municipal pension board to establish a proportionate retirement program to allow an employee to use combined credited service in the participating retirement systems. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 4, Article 6243g, V.T.C.S., as follows: Sec. 4. PERSONS NOT ELIGIBLE UNDER THIS ACT. Deletes language specifying that persons drawing a pension from a municipal pension plan are not eligible for membership in another municipal pension plan. SECTION 2. Amends Chapter 358, Article 6243g, V.T.C.S., by adding Section 16B, as follows: Sec. 16B. TRANSFER OF MEMBERSHIP. (a) Authorizes a municipal pension board (board) to authorize a person who is a member of the pension system as previously authorized by Article 6243g (Pension System in cities over 900,000), V.T.C.S., who is in a position covered by another retirement system to which the city contributes, and who has not begun to receive payment of benefits from the pension system to make a one-time irrevocable election, on a date in a manner to be established by the board, to cease to be a member of the pension system and, for future service only, become a member of the retirement system governed by certain specified statutes. (b) Provides that a person who does not make an election to cease membership in the pension system under Subsection (a) remains a member of the pension system as authorized under Article 6243g, V.T.C.S. (c) Provides that for purposes of Article 6243g, V.T.C.S., a person who makes an election to cease membership in the pension system is considered to have separated from service on the date of the election established by the board. SECTION 3. Amends Article 6243g, V.T.C.S., by adding Section 22A, as follows: Sec. 22A. GROUP C MEMBERSHIP, SERVICE REQUIREMENTS, AND BENEFITS. (a) Provides that a Group C member is subject to the same provisions that are applicable to a Group A member except as provided by this section. (b) Defines "credited service," "effective date of participation," "executive official," "Group C," and "plan." (c) Provides that all executive officials are members of Group C. Specifies provisions for declining membership in Group C. Provides that election to not participate in Group C is irrevocable and constitutes a waiver of the benefits provided by the plan. Requires an eligible person declining membership of Group C to participate in Group A or Group B, as applicable. (d) Provides that if a Group C member who separates from service for a reason other than death or retirement is eligible to receive a refund of the member's contribution to Group C. Requires issuance of the refund to be made in a manner prescribed by the board. Provides that receipt of a refund as described by this subsection forfeits the member's credited service, and all rights to benefits under the plan, and terminates membership in the plan. (e) Provides that if an executive official who terminates membership in Group C under Subsection (d) subsequently becomes eligible for membership in the plan under Subsection (c), credited service accrues beginning on the date the member's most recent eligibility began. (f) Authorizes a person who receives a refund under Subsection (d) to restore the credited service forfeited under Subsection (d) by filing a written election form with the board and repaying the amount of the member's contributions previously withdrawn under Subsection (d) within the earlier of five years after the date of the member's election or 60 days after the date of the member's separation from service, with interest on that amount at the rate of six percent. Prohibits credited service from being restored until complete repayment is made. (g) Requires a Group C member to receive twice the number of actual years of credited service solely for the purpose of fulfilling the eligibility requirements for a normal retirement pension in Group C as provided by Subsection (h). Requires all other computations under Article 6243g, V.T.C.S., to use the actual years of credited service in Group C. (h) Provides that a Group C member who ceases to be an executive official separates from service and becomes eligible for a normal retirement pension when the member fulfills the requirements for a normal retirement pension under Section 11 (Retirement on pension), Article 6243g, V.T.C.S., or attains 65 years of age with any amount of credited service. (i) Provides the manner in which the amount of the monthly pension for each Group C member will be computed. (j) Provides that previous service of a Group C member in Group A or Group B is governed by the applicable Group A or Group B provisions and may not be credited to Group C. Prohibits Group C service from being credited to Group A or Group B. (k) Provides that except as provided by Subsection (j), this section applies to a plan member only while the individual is an executive official. Requires an individual who ceases to be an executive official and transfers to a municipal position covered by Group A to participate in Group A. Provides that the individual does not forfeit Group C service and remains eligible for normal retirement for Group C service as provided under Subsection (h) of this section. SECTION 4. Amends Article 6243g, V.T.C.S., by adding Section 33A, as follows: Sec. 33A. PROPORTIONATE RETIREMENT PROGRAM WITH PARTICIPATING RETIREMENT SYSTEMS. (a) Authorizes the board to establish a program of proportionate retirement benefits (program) subject to the requirements of this section. (b) Defines "combined service credit," "eligible participant," "maximum benefit," "participating retirement system," and "service credit." (c) Provides that participation by the municipal pension system in the program is voluntary. Provides the manner by which the board may become a participant in the program. Sets forth the effective date of participation. Provides the manner by which the board may terminate participation. Sets forth the effective date of termination. (d) Provides that an eligible participant's combined service credit is usable solely for determining eligibility for service retirement benefits if the person is in a position covered by Article 6243g, V.T.C.S. Prohibits an eligible participant's combined service from being used in determining eligibility for a type of benefit other than service retirement benefits or DROP participation, or determining the amount of any type of benefit. Provides that the amount of a benefit payable by the pension system conforms to the statutes and rules governing the pension system. Provides that the pension system has sole responsibility and discretion to determine the eligibility of eligible participants for benefits and the amount and duration of proportionate retirement benefits. (e) Provides that a person who withdraws pension contributions from a participating retirement system ceases to be a member of that system. Provides that membership, service credit, and combined service credit for which contributions were withdrawn or forfeited may be reestablished under the statutes and rules governing that system. Provides that a lump-sum distribution is governed by the statutes and rules applicable to the particular retirement system. (f) Prohibits a person who has service credit in another participating retirement system from voting in a board election or holding a position on the board. (g) Requires the board to make determinations regarding an eligible participant's combined service credit based on complete and certified records of a participating retirement system and of the city. (h) Sets forth the manner by which the provisions of Sections 15 (Computing period of service) and 16 (Termination of employment; death; reemployment), Article 6243g, V.T.C.S., pertaining to interruption of service and termination of employment, do not apply to an eligible participant. (i) Authorizes the pension system to pay a benefit under the program to an eligible participant using combined service credit only if the participant is eligible to receive and has applied for the benefit from the applicable other participating retirement systems. Prohibits the participant from becoming eligible to receive a proportionate retirement benefit from the program while employed in a position covered by the pension system. (j) Sets forth the provisions by which an eligible participant may receive disability benefits, and the amount of the benefit. Authorizes the board to require examinations, reports, and other information as provided by Article 6243g, V.T.C.S., for the administration and payment of disability benefits. Provides that the board has a right to reduce, suspend, or terminate a benefit accordingly. (k) Sets forth provisions by which creditable military service may be credited in the pension system. (l) Authorizes the board to adopt rules and policies for implementing and administering the program. (m) Prohibits a person from becoming eligible to receive a benefit under this section that is greater than the benefit the person would otherwise receive under Article 6243g, V.T.C.S., if this section did not apply. Requires a benefit otherwise payable under Section 13(b), Article 6243g, V.T.C.S., on behalf of a person who has used combined service credit to qualify for benefits from at least one participating retirement system to be computed and payable as provided by Section 13(a), Article 6243g, V.T.C.S. SECTION 5. Effective date: September 1, 1999. SECTION 6. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies SECTION 1 of the original to reinstate the title "PERSONS NOT ELIGIBLE UNDER THIS ACT" to Section 4, Article 6243g, V.T.C.S. The substitute replaces SECTION 2 of the original with new language. New SECTION 2 amends Article 6243g, V.T.C.S., by adding Section 16B (Transfer of Membership), to set forth the manner in which a member of a retirement system may transfer to the pension system. For a complete analysis of new Section 16B, please see the Section-by-Section analysis portion of this document. SECTION 2 of the original amends Section 5(b), Article 6243g, V.T.C.S., to provide that elected members of the municipal pension board (board), rather than the governing body of the city, are to appoint the taxpayer board members required under this section. SECTION 2 of the original also prohibits the appointed taxpayers from being retirees of the city, and sets forth the manner by which a vacancy is to be filled. The substitute modifies SECTION 3 of the original to add the title "GROUP C MEMBERSHIP, SERVICE REQUIREMENTS, AND BENEFITS" to proposed Section 22A, Article 6243g, V.T.C.S. The substitute also modifies proposed Subsection (b) in SECTION 3 of the original to make a nonsubstantive change to the definition of "effective date of participation." The substitute redefines "executive official" by deleting proposed text that defines that term as including the mayor, the city controller, and the elected city council members of a city covered by Article 6243g, V.T.C.S. In addition, the substitute modifies proposed Subsection (f) in SECTION 3 of the original to provide that a member who wishes to restore refunded credited service previously withdrawn under Section 22A(d) must repay the amount within the earlier of five years after the date of the member's election or 60 days after the date of the member's separation from service, rather than five years after the date of the member's reemployment. The substitute also modifies SECTION 3 of the original in proposed Subsection (h) to add language to provide that a Group C member is eligible for a normal retirement pension when the member separates from service, and fulfills the specified requirement for age and years of credited service or attains 65 years of age with any amount of credited service, rather than completes less than 5 years of credited service. The substitute modifies SECTION 4 of the original to add the title "PROPORTIONATE RETIREMENT PROGRAM WITH PARTICIPATING RETIREMENT SYSTEMS" to proposed Section 33A, Article 6243g, V.T.C.S. The substitute modifies proposed Section 33A(d) to provide that an eligible participant's combined service credit is usable for determining eligibility for DROP participation if the person is in a position covered by Article 6243g, V.T.C.S.